SHORT SALES STANDING TALL IN REAL ESTATE MARKET

Option for struggling homeowners has surpassed foreclosures, but housing distress remains high

Changes in mortgage regulations also have helped drive down foreclosures, said Ruhl, the real estate agent. Starting this year, servicers — the companies to which homeowners send their mortgage payments — cannot start the foreclosure process while a loan modification has been submitted or is being reviewed. This is called dual tracking.

Certain banks began to stop the process of dual tracking, which kicks off with the filing of a notice of default, midway into 2012, noticed Ruhl, who suspects banks were doing that in preparation of this year’s change.

The dual-tracking rule is among several new regulations put out by federal agency Consumer Financial Protection Bureau this year. The aim is to better regulate mortgage servicers, companies that were accused of approving loan documents during the height of the foreclosure crisis with little to no proper review. This is called robo-signing.

Another new regulation, also expected to stem the flow of foreclosures, requires banks to provide consumers a full-spectrum look at foreclosure-prevention options for those who fall behind on mortgage payments. The new rules also restrict lenders from offering mortgages with “risky features,” the same ones that clobbered borrowers during the economic downturn.

Michael Lea, real estate professor at SDSU, called the new rules over-regulation, which he believes could hurt the market.